Financial Planning For Children What Parents Say

2024-08-02

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Having children is one of the key milestones in life; and with great joy, comes great responsibility. With rising costs and an unpredictable economy, parents are getting more and more alert about financial decisions concerning their children.

Financial goals of parents

As per an Economic Times Wealth study, the top 10 financial goals of Indian families have changed in the past decade. However, the topmost goal hasn’t changed- children’s education. The other big financial responsibility for children, their marriage, has taken a backseat and been pushed out of the top 5 to the 7th spot. This gives us a clear picture that Indian parents were, are, and probably will be most worried about their children’s education. Right from the baby-planning stage, financial planning for your child immediately begins with educational expenses.

Cost of children’s education in India

According to various studies, education for a child costs a significant 18.3% of the total income of the average household in India. Indian parents spend an average of Rs.12.2 lakhs on primary to undergraduate level education of their children. This number shoots up to even scarier amounts when it comes to an engineering or medical degree.

Inflation of educational costs

In the past 10 years, school fees, tuition fees, etc. have increased by a staggering 150%. The costs of technical and professional education have risen by 96% in the same period. If inflation has hit any sector very badly, it’s education.

Optimism of parents

87% of Indian parents are confident that their children will have a bright future. 85% are confident that their children will secure great jobs. With the increasing emphasis on making children financially independent and better financial tools available for funding education, this optimism is well-founded. However, the ways in which parents plan for educational expenses are not convenient.

How parents fund these hopes

The four main sources of finance for education are

Regular income
General savings
Specific investments
Combination of the above

Only 30% of Indian parents are using specific investments for funding their children’s education. The rest make sacrifices like reducing spending wherever possible, reducing leisure activities, working overtime for extra pay, and deducting from their own retirement savings or other savings for themselves. These are clearly not the best ways to conduct financial planning for your child.

The ideal option- a ULIP

A Unit Linked Savings Plan or a ULIP is an insurance-cum-investment tool that gives you the benefits of both simultaneously. A part of the premium is paid towards investments chosen as per your risk appetite, and the other part is used for an insurance cover.

How does a ULIP help you as parents?

Flexibility

A ULIP comes with great flexibility to switch investments at almost any point of the plan, if you feel that your funds are not performing well. This gives you a great amount of control on your investments. You can easily switch between equity and debt, depending on your needs and goals. You can decide when you want to take a risk and when you want to play things safe.

Financial discipline

A ULIP will inculcate financial discipline with a feeling of security to go with it. With each premium, you know that you are accumulating wealth for your children and also protecting them.

Insurance cover

The best ULIP come with a suitable insurance cover that will pay a sum assured to your child upon your unfortunate death, so that their education is not affected. Meanwhile, your investment payouts can take care of other expenses as well.

Partial withdrawals

In the event of an unforeseen expense, you can even partially withdraw from your ULIP plan without terminating the plan.

Invest 4G Plan

One of the best ULIP that you can choose for your child’s education is Canara HSBC life insurance’s Invest 4G plan. It offers you the flexibility of choosing between 7 different funds, 4 different portfolio strategies, and 3 benefit options to customize your investment towards financial planning for your child. It also offers the extra benefits of Loyalty Additions and Wealth Boosters to your hard-saved money. There is also an option of return of mortality charge, which saves further costs.

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